Tips for Paying Student Loans
The Wall Street Journal recently printed an article (May 7, 2018) that addressed some key issues most students and parents are not aware of. I’ve taken the liberty to feature some important tips.
Borrow only what you need – sounds simple enough, but sometimes a federal or private loan can be returned early if the student realizes in a timely manner that they don’t need them. There could be an unexpected scholarship or the expenses are lower due to other reasons, such as living at home.
o Students can ask the financial aid office within 120 days of disbursement at no penalty to return portions of the loan.
o It’s not advisable to keep the unneeded loan because of the interest payments, so keep that in mind.
Choose your repayment plan carefully – the longer it takes to pay off the loan, the longer a borrower will continue to accrue interest.
o The Standard Repayment Plan of a federal student loan, will be paid off after 10 years of payments, unless the student decides to consolidate them.
o Students can also select an income-driven repayment plan. These plans set payment at a percentage of income and typically have a lower monthly payment.
o Students can switch between these plans at any time.
Make payments while in school, if you can – most programs have a six-month grace period – or 9 months with the Federal Perkins Loans – after graduation.
o Paying some money before it is due doesn’t alter the grade period, and it can make a significant difference in the total amount due.
o Check out College Ave Student Loans. This company will lower the interest rate for making payments early.
Make extra payments when you can
o Students have the option to pay more than the minimum requirement without penalty. It can be an extra payment whenever there’s extra cash.
o The Education Department recommends that students inform the loan service provider that any extra payments are applied immediately and aren’t intended to be put toward future payments.
Enroll in automatic debit
o Federal loans and several private lenders offer an interest-rate deduction for enrolling in automatic debit accounts.